In this second installment of our two part series on rate review, we’ll take a closer look at transparency, requirements for an “effective” state program, and how the rate review grants program is helping states improve their review processes.

Transparency is an important element of the Affordable Care Act (ACA). The rate review provision of the ACA provides an “unprecedented level of scrutiny and transparency to health insurance rate increases” to protect consumers from unjustified premium increases. Consumers in all 50 states will have access to the proposed rate increases, an explanation from the insurer as to why it believes an increase is necessary, and, for the first time, be able to comment on the proposed rate increase. After analysis and public comment the final determination, and the reasoning behind it, are made public.

Rate review information is available on at: You can look up proposed rate increases by insurance company or overall by state.

The transparency that the rate review program provides not only protects consumers from unjustified rate increases, it promotes competition and encourages insurers to keep costs down. It builds on other provisions (such as the Medical Loss Ratio 80/20 rule) and aligns with the ACA’s goal to make health care more affordable.

Every state must have an “effective” rate review program. If it doesn’t, HHS will review rates for the state. The Center for Consumer Information & Insurance Oversight defines “An effective rate review system” as follows:

  • Must receive sufficient data and documentation concerning rate increases to conduct an examination of the reasonableness of the proposed increases.
  • Must consider the factors below as they apply to the review:
    • Medical cost trend changes by major service categories
    • Changes in utilization of services (i.e., hospital care, pharmaceuticals, doctors’ office visits) by major service categories
    • Cost-sharing changes by major service categories
    • Changes in benefits
    • Changes in enrollee risk profile
    • Impact of over- or under-estimate of medical trend in previous years on the current rate
    • Reserve needs
    • Administrative costs related to programs that improve health care quality
    • Other administrative costs
    • Applicable taxes and licensing or regulatory fees
    • Medical loss ratio
    • The issuer’s capital and surplus
    • Must make a determination of the reasonableness of the rate increase under a standard set forth in State statute or regulation.
    • Must post either rate filings under review or preliminary justifications on their websites or post a link to the preliminary justifications that appear on the CMS website.
    • Must provide a mechanism for receiving public comments on proposed rate increases.
    • Must report results of rate reviews to CMS for rate increases subject to review.

Source: CCIIO

Forty-four states and the District of Columbia have rate review programs that the HHS has deemed “effective.”  Some states have the power to deny or modify the proposed rate increase if it is deemed unreasonable. Other states can determine the rate is unreasonable, but don’t have the authority to stop the insurer from implementing the increase. HHS will review proposed rate increases for states that do not have an “effective” review program, but it lacks the authority to deny rate increases.

The $250 million Rate Review Grants Program is designed to provide states with funding to improve their rate review programs. These funds have made it possible for states to build and improve the quality and efficiency of their rate review programs and provide consumers with greater transparency and protection from unjustified rate hikes. HHS anticipates awarding additional funds in 2012 and 2013 to help states further improve their ability to protect consumers.

According to the 2012 Annual Rate Review Report: Rate Review Saves Estimated $1 Billion for consumers, the rate review grants program has helped 21 states expanded the scope of their rate review efforts, 41 states have improved the quality and efficiency of their rate review process, and 42 states have increased consumer transparency. In addition, it has helped states empower consumers with information that was previously not available.

Before the ACA most consumers were left in the dark regarding premium rate increases. Many experts believe this lead to insurance company abuses and unnecessarily high premiums. The Rate Review Program and the Rate Review Grants Program have helped states provide consumer protection by analyzing and disclosing proposed double digit rate increases to consumers.

Read: Rate Review – Protecting Consumers from Unjustified Premium Increases: Part One


2012 Annual Rate Review Report: Rate Review Saves Estimated $1 Billion for Consumers

Quantifying the Effects of Health Insurance Rate Review


Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare insurance exchange.

Why have exchanges? … What is an exchange? What isn’t?: A Two-Part Blog Series on Health Care Insurance Exchanges

By Brian Bohlig, chief marketing officer
Extend Health – A Towers Watson company

You wouldn’t call it a stock exchange if only one company was selling shares on it, right? It’s easy to see how that kind of a market would benefit the company selling on it – buy my product and forget the rest.

But how does that help consumers?

As a corporate or government employer or professional/trade association, you should be asking this question if you want to offer employees /members – present or retired – health care coverage through an exchange.

What you find when you look under the hood of some of exchanges might surprise you, because some models aren’t set to drive all the value and savings organizations and consumers  aspire to when making the transition from a group health insurance plan to the individual market.

Why an exchange?

The reason for exchanges in the first place is to help get a handle on an industry known for its complexity and high costs. A nimble exchange has the potential to slice through health care and insurance industry complexity and costs with:

  • Apples to apples comparisons – Putting comparable plans from different carriers beside one another so consumers can make sense of the benefit differences.
  • Transparency – Showing pricing, not just of medical plans but also helping assess out-of-pocket costs consumers could see down the road based on prescription medication needs, the kinds of doctors they see and where.
  • Objectivity – A system that doesn’t promote certain plans for non-consumer-oriented reasons, like commissions, or for the administrative ease of the exchange itself.
  • Cost-savings – By making it easy to compare plans side by side, it creates a competitive environment where consumers can pick the least expensive plan that meets their needs best.

Extend Health has been running an exchange for eight years. In 2005, when the Medicare Modernization Act did for Medicare insurance plans what health care reform is doing for everyone else now, we set up the first real private Medicare exchange  – an exchange that gave retired employees of our employer clients access to the individual Medicare plan market – an exchange that moved beyond the one-size fits all structure of employer group plans. We enrolled retirees from our first employer, Chrysler, in 2006.

Today we offer the largest number of carriers – over 75 and counting, serve the largest number of employer clients – over 175 (40+ Fortune 500s) and counting, and the largest number of consumers who have selected individual Medicare plans through our exchange – over 200,000 and counting.

Since Extend Health became a Towers Watson company back in May and the Supreme Court ruling upholding health care reform, many clients, retiree, reporters and others in the health care industry have been asking us about exchanges and what to expect.

At this pivotal point in the evolution of health care in our nation, Extend Health is in a unique position. Features of the Medicare environment, like guaranteed issue and standardized plans, are being applied to the rest of the U.S. health care environment. And we have deep, long-standing measures and knowledge about how consumers, employers and carriers have fared on the Extend Health exchange.

In the next post of this series, I share what experience has taught us about what to look for and what to ask when you’re considering an exchange.

For regular commentary on developments and trends in health care, insurance, and technology, follow @brycewatch  and @ExtendHealth on Twitter and check out

Related articles

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare insurance exchange.

The GAO recently released the new report title Medicaid Expansion: States’ Implementation of the Patient Protections and Affordable Care Act. The report contains results of research conducted to see what states are doing to implement Medicaid expansion, learn what their responsibilities are, and identify what challenges they face. It addresses the following issues relating to implementing Medicaid expansion:

  • State responsibilities
  • Actions taken to prepare
  • States’ views on the financial implications of expansion

The GAO conducted a web-based survey and interviewed Medicaid officials in six states: Colorado, Georgia, Iowa, Minnesota, New York, and Virginia. They selected these states based on:

  • Size of expected enrollment
  • Enrollment rates
  • Geographic dispersion
  • Insurance coverage provided to childless adults

The ACA requires Medicaid eligibility to be expanded to non-elderly people with incomes at or below 133% or the federal poverty level (FPL). It also specifies that each state must change how it determines Medicaid eligibility, as well as streamline eligibility and enrollment systems that will coordinate enrollment across Medicaid, Children’s Health Insurance Program (CHIP) and the state health insurance exchanges.

The bill allows states to opt out of the expansion, but stipulates that they will lose their existing federal Medicaid funds if they do so. When the Supreme Court ruled on the constitutionality of the health care law in June of 2012, it modified the provision on Medicaid expansion by allowing states to opt out without losing their existing federal Medicaid funding. This change prompted the Congressional Budget Office (CBO) to update its budget estimates, reflecting projections that fewer people will be covered by Medicaid and CHIP, while more people will be enrolled through state health insurance exchanges and uninsured than in its previous estimate. The GAO completed its field work on this study prior to the Supreme Court’s ruling, so the impact of that decision was not included in their analysis. However, the requirements for states that choose to participate in the Medicaid expansion have not changed as a result of the Supreme Court decision and the report is still a useful snapshot of how these states are getting on with preparations for it.

Requirements for states that participate in Medicaid expansion

By January 1, 2014 states must:

  • Expand eligibility to non-elderly people with incomes at or below 133% of FPL
  • Streamline their enrollment process
  • Transition to Modified Adjusted Gross Income (MAGI) to determine income eligibility
  • Identify those who are newly eligible to obtain federal matching funds
  • Simplify and streamline the eligibility determination process

Table 1: ACA provisions included in the GAO study.

ACA Provision


Medicaid eligibility Expand eligibility to non-elderly people with incomes at or below 133% of FPL.
Modified adjusted gross income (MAGI) Transition to using MAGI to determine income eligibility.
Early expansion option States can expand coverage to newly eligible people prior to January 1, 2014.
Maintenance of effort States must maintain eligibility standards until an exchange is fully operational.
Federal matching Federal matching funds will be provided to states for newly eligible adults.
Streamlined eligibility and enrollment systems “States must provide a process for individuals to apply for or renew their Medicaid eligibility through a website that enrolls individuals in the appropriate program (Medicaid, CHIP, or exchanges) no matter to which program they originally apply.”

The GAO found that the states studied are taking steps to prepare for Medicaid expansion, but they face some challenges including the need for additional federal regulations and guidance. CMS has issued a final Medicaid rule and indicated that more guidance will be forthcoming. In addition, the majority of state budget directors interviewed believe the following factors will contribute to the cost of expanding Medicaid.

  1. Administration required to manage Medicaid enrollment
  2. Acquisition or modification of information technology systems to support Medicaid
  3. Enrolling people who were previously eligible, but have not so far enrolled in Medicaid

They also expressed uncertainty about:

  • The impact of shifting exiting Medicaid enrollees into health benefit exchanges
  • Fiscal capacity and the state’s share of Medicaid expenditures
  • Guidance needed to develop budget estimates
  • Additional regulations and/or guidance needed on
    • How to apply MAGI
    • Conversion of Medicaid eligibility standards
    • Access to eligibility data through the Federal Data Services Hub

After reviewing and commenting on the study, HHS agreed to provide states with additional regulations and/or guidance on MAGI conversion and FMAP computation. HHS also reiterated that the decision to participate in Medicaid expansion is up to the state – there is no deadline date for their decision – and federal matching funds are available to help states cover information technology costs for modernizing eligibility systems, which don’t have to be paid back if the state decides not to expand Medicaid.

Read the GAO report

Previous blog post: CBO update estimates $84 billion savings from SCOTUS decision

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare insurance exchange.

Extend Health exhibited at the Garland Senior Fair in Texas this past Sat, Aug 4. There was a great turnout of over 350 people from the community and surrounding areas including seniors, their families, community leaders and service providers like us, who care about seniors and senior issues.

State Representative Angie Chen Button thanked Dwight and Ivory in person for exhibiting at the fair, fulfilling an invitation that she extended to Bryce Williams, Towers Watson Managing Director of Extend Health, at the ribbon-cutting of the first Extend Health service center in Richardson this past May.

Richardson Mayor Bob Townsend encouraged everyone to make good use of the resources available. And many other community leaders, including City of Rowlett Senior Advisory Board members Pamela Bell and Wayne Baxter, met with attendees and the community groups and companies exhibiting.

Dwight Turner and Ivory Rooks, both senior benefit advisors for Extend Health, who have years of experience helping seniors choose the best Medicare plans for them, served as Extend Health ambassadors. They answered people’s questions about Medicare and shared resources with them, explaining the role Extend Health can play in helping to connect people with the best coverage for their needs.

According to Dwight, “We put the care into shopping for Medicare!“

Ivory added, “It was great to be able to connect in person with people and extend a helping hand.”

Extend Health contributed a Texas-themed gift basket, which was raffled off to a lucky winner. The day was welcome chance to connect in person with many in a community that is very important to Extend Health.

We recently announced that Extend Health is bringing over 500 jobs to the community with the opening of its second service center in the Richardson Telecom Corridor.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare insurance exchange.

Extend Health held its very first tweet chat today. The topic was health care reform, and there were some really great questions – and a bit of humor tossed in too. John Barkett, Dir. of Policy Affairs at ExtendHealth fielded questions. John worked in congress on health care and his wealth of knowledge was evident in the answers he provided.

If you missed our tweet chat you can read a complete recap of the event. Hope to see you at the next one!

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare insurance exchange.

Back in December of 2011 the U.S. Department of Health and Human Services chose 32 organizations to participate in the Pioneer Model test initiative that stated on January 1, 2012. On July 9th, HHS announced 89 new ACOs that will serve 1.2 million people with Medicare in 40 states and Washington, D.C. The program overall now includes 154 ACOs that are providing care to 2.4 million people.

ACOs consist of doctors, hospitals and other health care providers that work together to deliver high-quality health care and reduce costs. Participation in this shared savings program under the ACA is voluntary, and providers are incentivized by the opportunity to share in the savings they help create. ACOs must meet 33 quality measures to insure that the savings generated result from improving the coordination and quality of care.

Not all ACOs are large organizations. Nearly half are physician-driven with less than 10,000 beneficiaries. The program is estimated to save the federal government up to $940 million over four years.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare insurance exchange.

Back in August of 2011 we wrote  about a new program from the U.S. Department of Health and Human Services (HHS) called the Bundled Payments for Care Improvement initiative that would allow multiple providers to bundle payment for services a patient receives for a single “episode of care,” such as heart bypass surgery or a hip replacement. The program was designed to incentivize health care providers (hospitals, doctors, clinicians, etc.) to work together to reduce costs and provide better care. As part of our ongoing interest in measures to reduce health care costs, we’re posting this summary of trends in bundled payments.

Bundling payments is not a new idea. The first large scale CMS pilot of bundled payments was Medicare’s Heart Bypass Center Demonstration that ran from 1991 to 1996. It saved Medicare over $42 million and saved patients nearly $8 million. It also improved the quality of care and lowered hospital mortality.

Health Care Incentives Improvement Institute (HCI3) recently released a report titled Bundled Payment Across the U.S. Today. They found that the most common reasons for choosing a procedure or condition to bundle are based on cost, how easy it is to define and implement the bundle, and how it aligns with existing initiatives. In the future, bundles may also be influenced by those adopted by Medicare.

Procedural inpatient conditions like hip and knee replacement make good bundle candidates because they are easy to define and standardize. Chronic conditions like diabetes are more difficult to bundle than procedural conditions, but offer the greatest opportunity to generate savings by bundling. Among bundles created by providers and payers in the HCI3 study, there were few for outpatient procedures and none for acute medical conditions.

Bundles are defined by the services include, the time period covered, and patients included.  After defining the bundle, payers and providers negotiate its price. Defining a bundle is complex and can take a great deal of time and effort for providers and payers to analyze and come to an agreement on the final definition. Bundle rates can be defined as risk-adjusted or flat-fee; risk-adjusted rates vary with the severity of the patient’s condition, while flat-fee rates stay the same for every patient.

There are two types of payment bundles, retrospective and prospective, and four broad models for bundling payments. Payers and providers work together to determine the episodes of care and services they want to bundle together based on what works best for them.

1. Retrospective Payment Bundles – Payers & providers set a target price for an episode of care. Participants are paid using the Original Medicare fee-for-service system, and then add an administrative budget reconciliation process at the conclusion of each episode. While some feel this method does not represent true bundled payment, it is used because the technical and administrative infrastructure is already in place for providers and payers. Setting up a “true” bundled payment system would require an expensive investment in changing billing practices. The types of episodes that work for retrospective payment bundles are:

  • Model 1 – Inpatient stay in a general acute care hospital
  • Model 2 – Inpatient stay plus post-acute care
  • Model 3 – Post-discharge services only

2. Prospective Payment Bundles – Payers make a single, prospectively determined bundled payment to the hospital for services furnished. Prospective payment bundles are only available for:

  • Model 4 – Inpatient stay only

Payers send spending reports to providers on a monthly or quarterly basis so providers can keep track of the amount spent on the bundle.  Payments must be reconciled at the end of an episode to make sure claims are associated correctly with the bundle. While quality measures were being used in various ways, only one of the participants in the HCI3 study was using them to adjust payment amounts, because it is difficult to find acceptable quality measures that can be directly tracked to spending.

Risk and savings are used to incentivize providers to increase the success of bundled payments systems. There are three types of savings/risk arrangements.

  1. Shared savings – incentivizes the provider to reduce spending below the negotiated bundled rate by letting them share in the savings.
  2. Shared risk – incentivizes the provider to reduce spending by putting them at risk for costs above the negotiated bundled rate and letting them share in the savings.
  3. Full risk – puts the provider at full risk for all costs above the negotiated bundle rate, but allows them to keep all of the savings.

Bundled payments are gaining in popularity, but the volume remains low because of the high number of exclusions negotiated between payers and suppliers, and issues with lack of continuous enrollment. It may be too early to draw any definite conclusions, but there are early indications that bundled payments have delivered some cost savings. Decreased readmissions, complications and mortality have been reported too. Many are using their early experiences with bundled payments to help them prepare for the future and develop new payment and risk-sharing strategies.

Read the HCI3 report

Bundled Payments for Care Improvement, CMS Innovation

Affordable Care Act initiative to lower costs, help doctors and hospitals coordinate care

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.

Coventry Health Care just recognized Extend Health for efficiency and customer satisfaction, including zero customer complaints in 2011. Here’s a brief snip from the press release.

“Extend Health Inc., a leading provider of health benefits management services, including the nation’s largest private Medicare exchange, received two first place awards from Bethesda, Maryland-based Coventry Health Care, Inc. (NYSE:CVH) for exceptional customer service performance by a partner in 2011.

  • Zero customer complaints reported to the Centers for Medicare and Medicaid Services (CMS) by seniors signing up for Coventry private Medicare supplement plans through Extend Health;
  • The lowest 90-day plan cancellation rate — called rapid disenrollment — which, at just 0.5 percent, was far less than the typical rate.”

Click here to read the complete news release.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.

As employers consider alternatives to offering retirees traditional group Medicare insurance, they may evaluate more than one supplemental insurance solution. Employers often compare an Employer Group Waiver Plan (EGWP) solution with a private Medicare exchange such as the one provided by Extend Health. Both solutions offer some clear benefits, including:

  • Financial relief provided by CMS subsidies
  • GASB and FAS liability reductions
  • Catastrophic payment relief
  • Increased benefit flexibility

However, only a Medicare exchange can reduce an employer’s administrative burden, and only a Medicare exchange can provide post-65 retirees with the flexibility to choose a supplemental plan that meets their needs, often at a lower cost. These are solid reasons to move to a Medicare exchange solution, but employers with certain populations, such as unions that have strong contractual benefits obligations, may prefer not to migrate their full Medicare-eligible population to an exchange.

Understanding that both solutions offer advantages for employers, Extend Health has partnered with Medco to provide an Extend Health EGWP solution. Employers can leverage the power of the individual Medicare marketplace through the nation’s largest private Medicare exchange, recognize savings, and meet ongoing obligations to retain a group prescription drug program where necessary.

Read on to learn more.  Read the rest of this entry »

If you are considering a move to a Medicare Exchange for your retirees, now is the time to start thinking about an off-cycle transition. Because the Retiree Drug Subsidy loses its tax-deductible status starting in 2013, many corporate employers are timing a new retiree strategy to coincide with this pivotal legislative change. Extend Health and CMS anticipate a very busy fall season in 2012 due to this tax event, as employers decide to make transformative changes to retiree benefit plans.

Making a change to your Medicare population does not have to coincide with the Annual Enrollment Period (AEP) in the fourth quarter. Changes can be made at any time during the year. Many Extend Health clients have chosen to transition to the Medicare exchange platform for effective dates other than January 1st.

Among the advantages of making an “off-cycle” transition in 2012 is the ability to avoid the busy fall enrollment season, when existing Medicare beneficiaries can and often do review and change their Medicare Advantage or Medicare Part D coverage. Retirees who lose group coverage always have guaranteed Issue status during a special enrollment period that allows them to move into the individual supplemental Medicare market — no matter what time of year the change takes place.

An off-cycle transition also separates retiree benefits management tasks from the usual end-of-year enrollment period for active employees. HR departments can focus on the retiree transition without also having to manage the administration of active employee enrollment at the same time.

If you choose an off-cycle transition, you can have full confidence that Extend Health will take good care of your retirees and that it will allow them (and you) to avoid the AEP rush.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.